<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
/ X / Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Six Months Ended April 28, 1995
Or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________________ to _____________________
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
(Exact name of registrant as specified in its charter)
New York 13-5658129
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
The number of shares of Common Stock, $.10 par value, outstanding as of June 7,
1995 was 4,818,897.
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Six Months and Three Months Ended
April 28, 1995 and April 29, 1994 3
Condensed Consolidated Balance Sheets
April 28, 1995 and October 28, 1994 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended April 28, 1995 and April 29, 1994 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Six Months and Three Months Ended April 28, 1995 Compared to
the Six Months and Three Months Ended April 29, 1994 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURE 23
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------- -------------------
April 28, April 29, April 28, April 29,
1995 1994 1995 1994
--------- --------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
REVENUES:
Sales of services $342,539 $276,026 $175,021 $145,810
Sales of products 31,353 28,213 15,575 15,875
Equity in net income (loss)
of joint ventures--Note F (1,353) 990 95 940
Gain on sale of joint venture--Note F 9,770 9,770
Interest income 953 542 473 312
Losses on sales of securities (8) (9)
Other income (expense) - net--Note B (242) (201) 26 (216)
-------- -------- -------- --------
373,250 315,332 191,190 172,482
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales
Services 314,159 257,696 161,854 134,825
Products 20,397 18,382 9,992 10,356
Selling and administrative 20,134 19,657 10,383 10,792
Research, development & engineering 3,876 3,577 2,072 2,339
Depreciation and amortization 5,765 5,304 2,969 2,660
Foreign exchange (gain) loss - net (11) 121 48 25
Interest expense 3,422 4,038 1,736 1,963
-------- -------- -------- --------
367,742 308,775 189,054 162,960
-------- -------- -------- --------
Income before income tax provision
and extraordinary item 5,508 6,557 2,136 9,522
Income tax provision--Note H 2,055 2,719 706 3,721
-------- -------- -------- --------
Income before extraordinary item 3,453 3,838 1,430 5,801
Extraordinary item--Note D (189)
-------- -------- -------- --------
Net income $3,453 $3,649 $1,430 $5,801
======== ======== ======== ========
(Per Share Data)
Income before extraordinary item $.72 $.80 $.30 $1.21
Extraordinary item (.04)
---- ---- ---- -----
Net income $.72 $.76 $.30 $1.21
==== ==== ==== =====
Number of shares used in computation
-- Note G 4,810,182 4,802,466 4,816,161 4,802,905
========= ========= ========= ==========
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
April 28, October 28,
1995 1994 (a)
--------- -----------
(Dollars in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 13,506 $ 17,049
Short-term investments 1,989 4,974
Trade accounts receivable less allowances of
$3,911 (1995) and $4,027 (1994)--Note B 108,476 98,795
Inventories--Note C 24,718 27,239
Recoverable income taxes 135
Deferred income taxes 1,080 2,966
Prepaid expenses and other assets 5,397 4,387
-------- --------
TOTAL CURRENT ASSETS 155,301 155,410
INVESTMENTS IN SECURITIES 3,933 3,121
INVESTMENTS IN JOINT VENTURES--Note F 13,405 11,997
PROPERTY, PLANT AND EQUIPMENT--
at cost--Note D
Land and buildings 33,496 33,513
Machinery and equipment 44,377 42,175
Leasehold improvements 2,935 2,819
-------- --------
80,808 78,507
Less allowances for depreciation
and amortization 29,318 28,555
-------- --------
51,490 49,952
DEPOSITS, RECEIVABLES AND
OTHER ASSETS 2,578 1,562
INTANGIBLE ASSETS--net of accumulated
amortization of $3,806 (1995)
and $3,495 (1994) 5,646 4,862
-------- --------
$232,353 $226,904
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 4,910 $ 4,925
Current portion of long-term
debt--Note D 12,000 2,000
Accounts payable 20,408 25,018
Accrued expenses
Wages and commissions 20,736 19,859
Taxes other than income taxes 7,697 8,917
Insurance 19,123 15,039
Other 5,489 5,639
Customer advances and other liabilities 15,368 11,610
Income taxes 564
-------- --------
TOTAL CURRENT LIABILITIES 105,731 93,571
LONG-TERM DEBT--Note D 29,795 40,788
DEFERRED INCOME TAXES 3,169 2,700
-------- --------
138,695 137,059
STOCKHOLDERS' EQUITY--Notes
D, E and F
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued - 7,796,830 shares (1995)
and 7,789,580 shares (1994) 780 779
Paid-in capital 44,127 43,830
Retained earnings 95,108 91,655
Unrealized foreign currency
translation adjustment (322) (283)
Unrealized loss on
marketable securities (42) (47)
-------- --------
139,651 135,934
Less common stock held in treasury
at cost--2,977,933 shares (1995)
and 2,986,554 (1994) (45,993) (46,089)
-------- --------
93,658 89,845
-------- --------
$232,353 $226,904
======== ========
</TABLE>
(a) The Balance Sheet at October 28, 1994 has been derived from the
audited financial statements at that date.
See accompanying notes.
-4-
<PAGE> 5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
April 28, April 29,
1995 1994
--------- ---------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,453 $ 3,649
Adjustments to reconcile net income to cash
provided by operating activities:
Extraordinary loss 189
Depreciation and amortization 5,765 5,304
Equity in net (income) loss of joint ventures 1,353 (990)
Gain on sale of joint venture (9,770)
Distributions from joint ventures 1,153
Accounts receivable provisions 965 1,134
Amortization of deferred debenture costs,
debt discounts and other deferred charges 427 339
(Gains) losses on foreign currency translation 174 (258)
Gains on dispositions of fixed assets (7) (13)
Deferred income tax provision (benefit) 2,074 (40)
(Gains) losses on sales of securities (7) 8
Other 31 27
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (10,855) 5,398
(Increase) decrease in inventories 1,812 (1,780)
Increase in recoverable income taxes (135)
Increase in prepaid expenses
and other current assets (1,030) (1,211)
(Increase) decrease in deposits, receivables
and other assets (1,125) 800
Decrease in accounts payable (4,407) (4,542)
Increase in accrued expenses 3,962 5,763
Increase in customer advances and
other liabilities 3,702 5,106
Increase (decrease) in income tax liability (294) 2,878
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,858 13,144
-------- --------
</TABLE>
-5-
<PAGE> 6
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
April 28, April 29,
1995 1994
--------- ---------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of investments 6,851
Maturities of investments 8,000 949
Purchases of investments (5,811) (4,236)
Investment in joint ventures (2,824)
Proceeds from disposal of property,
plant and equipment 370 92
Purchases of property, plant and equipment (7,016) (6,656)
Proceeds from the sale of a joint venture 16,383
Other (1,125)
-------- --------
NET CASH PROVIDED BY (APPLIED TO)
INVESTING ACTIVITIES (8,406) 13,383
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (1,000) (20,000)
Exercise of stock options 143
Increase (decrease) in notes payable to banks 88 (1,290)
-------- --------
NET CASH APPLIED TO FINANCING
ACTIVITIES (769) (21,290)
-------- --------
Effect of exchange rate changes on cash (226) 127
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (3,543) 5,364
Cash and cash equivalents, beginning of period 17,049 41,081
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 13,506 $ 46,445
-------- --------
SUPPLEMENTAL INFORMATION
Cash paid (received) during the period
Interest expense $ 3,315 $ 4,997
Income taxes, net of refunds $ 350 $ (73)
</TABLE>
See accompanying notes.
-6-
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and Article 10 of
Regulation S-X and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting principles. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the Company's
financial position at April 28, 1995 and results of operations for the six and
three months ended April 28, 1995 and April 29, 1994 and cash flows for the six
months ended April 28, 1995 and April 29, 1994. Operating results for the six
and three months ended April 28, 1995 are not necessarily indicative of the
results that may be expected for the fiscal year ending November 3, 1995.
These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended October 28, 1994. The accounting policies used in preparing these
financial statements are the same as those described in the Company's Annual
Report.
The Company's fiscal year ends on the Friday nearest October 31.
Note B--Accounts Receivable
In October 1993, the Company entered into a three-year agreement to sell, on a
limited recourse basis, up to $25,000,000 of undivided interests in a designated
pool of certain eligible accounts receivable. In March 1995, the Company
increased this limit to $45,000,000. As collections reduce previously sold
undivided interests, interests in new receivables may be sold up to the
$45,000,000 level. At April 28, 1995, and October 28, 1994, $10,000,000 and
$25,000,000, respectively, of interests in accounts receivable had been sold
under this agreement. The sold accounts receivable are reflected as a reduction
of receivables in the accompanying balance sheets. The Company pays fees based
on the purchaser's borrowing costs incurred on short-term commercial paper which
financed the purchase of receivables. Other income (expense) in the accompanying
statements of income reflects $690,000 and $708,000 for such fees in the six
months ended, and $378,000 and $354,000 in the three months ended, April 28,
1995 and April 29, 1994, respectively.
The program extends through March 15, 1998; however, the purchaser may terminate
the agreement on a minimum of six months' notice. In addition, the agreement may
be terminated if the Company does not maintain a stated minimum tangible net
worth, as defined, or exceeds a stated maximum ratio of debt to tangible net
worth.
-7-
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note C--Inventories
Inventories consist of:
<TABLE>
<CAPTION>
April 28, October 28,
1995 1994
--------- -----------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $11,710 $ 9,521
Long-term contracts 5,136 10,277
------- -------
16,846 19,798
------- -------
Products:
Materials and work-in-process 3,608 3,700
Service parts 1,139 949
Finished goods 3,125 2,792
------- -------
7,872 7,441
------- -------
Total $24,718 $27,239
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, of
$55,418,000 at April 28, 1995 and $39,179,000 at October 28, 1994 are credited
against the related costs in inventory. Substantially all of the amounts billed
have been collected.
-8-
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note D--Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
April 28, October 28,
1995 1994
--------- -----------
(Dollars in thousands)
<S> <C> <C>
12-3/8% Senior Subordinated Debentures, due
July 1, 1998--net of unamortized discount of
$60,000 - 1995 and $67,000 - 1994 (a) $32,795 $32,788
Term loan (b) 9,000 10,000
------- -------
41,795 42,788
Less amounts due within one year 12,000 2,000
------- -------
Long-term debt $29,795 $40,788
======= =======
</TABLE>
(a) The debentures provide for interest to be paid semi-annually on January 1
and July 1 and are redeemable at the option of the Company, in whole or in part,
at 100% plus accrued interest. The accompanying statement of income for the six
months ended April 29, 1994 reflects an extraordinary charge of $189,000, net of
an income tax benefit of $101,000, related to the redemption of $20,000,000 of
debentures. In April 1995, the Company called, and on May 8, 1995 redeemed an
additional $10,000,000 of the debentures which, together with previously
redeemed and repurchased debentures, reduces the remaining principal amount to
$22,855,000, which is due July 1, 1998. The debentures are subordinated to all
existing and future senior indebtedness (as defined) of the Company. At April
28, 1995, the amount available for dividends, pursuant to the terms of the
indenture under which the debentures are issued, was $25,479,000 and, if no
dividend payments are made, the amount available for capital stock repurchases
was $35,479,000. However, under the terms of the term loan agreement, at such
date, only $8,314,000 was available for such payments (see (b) below).
(b) In October 1994, two subsidiaries of the Company entered into a $10,000,000
five-year loan agreement with National Westminster Bank which is secured by a
deed of trust on land and buildings (book value at April 28, 1995 -
$15,700,000). The obligation is guaranteed by Volt. The term loan bears interest
at 7.86% per annum and is repayable in twenty quarterly principal installments
of $500,000, together with interest. In October 1996, if certain conditions are
met, the loan may be extended for two years with a subsequent reduction of
principal payments to $225,000 per quarter and a final payment of $1,725,000,
due October, 2001. The agreement contains various financial covenants, the most
restrictive of which requires the Company to maintain a tangible net worth of
$79,000,000. As a result, only $8,314,000 was available for the payment of
dividends and stock repurchases at April 28, 1995.
-9-
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the six months ended
April 28, 1995 are as follows:
<TABLE>
<CAPTION>
Common Paid-In Retained Treasury
Stock Capital Earnings Stock
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Balance at October 28, 1994 $ 779 $ 43,830 $ 91,655 $(46,089)
Net income for the six months 3,453
Contribution to ESOP - 8,621 shares 154 96
Stock options exercised - 7,250 shares 1 143
-------- -------- -------- --------
Balance at April 28, 1995 $ 780 $ 44,127 $ 95,108 $(45,993)
======== ======== ======== =========
</TABLE>
The other components of stockholders' equity are a valuation allowance for the
unrealized loss on marketable securities and an unrealized foreign currency
translation adjustment due to the Company's investment in its Australian joint
venture, whose functional currency is the Australian dollar.
Note F--Summarized Financial Information of Joint Ventures
The Company owns 12-1/2% of the voting stock of Pacific Access Pty. Ltd.
("Pacific Access"), an international joint venture in Australia. This venture,
which commenced operations in July 1991, assumed responsibility throughout
Australia for the marketing, sales and compilation functions of all yellow pages
directories of Telstra Corporation Ltd., ("Telstra"), the Australian Government-
owned telephone company, under the terms of a twelve-year contract. The venture
produces a major portion of its revenues and significantly all of its profits in
the Company's second and third fiscal quarters. Telstra owns 50% of the voting
stock of Pacific Access. In the event of a change in control of the Company, as
defined, the Company may be required to sell its shares in the venture to
Telstra at a formula price based on various factors, including earnings.
In July 1994, the Company entered into a long-term joint venture agreement to
publish the official White Pages, Yellow Pages and Street Guides for Rio de
Janeiro. The Company has invested $5,341,000 to acquire a 50% interest in the
common shares, together with 75% of the issued preferred stock, of Telelistas
Editora Ltda., a Brazilian company which has a contract to publish Rio's
telephone directories on behalf of TELERJ, the government-owned telephone
company. The agreement requires the Company to invest up to an additional
$2,863,000 (which, together with the original investment, will represent 50% of
the common shares and 75% of the agreed initial preferred stock and debt
financing by the venturers) in the joint venture in fiscal year 1995 as well as
to provide technology, expertise and key personnel in directory production,
sales and marketing.
-10-
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
As a result of the funding requirements, during the start-up period the Company
is recognizing 75% of the losses incurred by the venture. At such time as the
venture becomes profitable, the Company will recognize 75% of the venture's net
income until start-up losses are recovered and 50% of any profits subsequent,
thereto.
Consolidated retained earnings at April 28, 1995 included $4,771,000,
representing the undistributed earnings of Pacific Access. Income taxes have
been paid or provided on such earnings.
The following summarizes the financial information of the joint ventures:
<TABLE>
<CAPTION>
April 28, 1995 October 28, 1994
--------------------------- -------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Current assets $ 185,592 $ 233,907
Noncurrent assets 16,337 16,629
Current liabilities (145,309) (198,521)
--------- ---------
Equity of combined joint ventures $ 56,620 $ 52,015
========= =========
Equity of Australian joint venture (a) $ 52,354 $ 10,061 $ 48,987 $ 9,677
Equity of Brazilian joint venture 4,266 3,344 3,028 2,320
--------- --------- --------- ---------
$ 56,620 $ 52,015
========= =========
Investments in joint ventures $ 13,405 $ 11,997
========= =========
</TABLE>
(a)-Pursuant to the Australian venture agreement, the initial capital
contributions of all venturers, other than Telstra, exceeded their proportionate
share of ownership interest in the corporate joint venture. The agreement
provides that, upon liquidation of the venture, the venturers will be entitled
to recover such excess contributions from the net assets of the venture.
-11-
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------------------------------
April 28, 1995 April 29, 1994
-------------------------- --------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues $ 215,736 $ 202,146
Costs and expenses 210,318 196,606
Income tax provision 4,230 1,645
--------- ---------
Net income $ 1,188 $ 3,895
========= =========
Net income of Australian joint venture $ 3,707 $ 448 $ 2,423 $ 329
Net loss of Brazilian joint venture (b) (2,519) (1,801)
Net income of United States joint venture (c) 1,472 661
--------- --------- --------- ---------
$ 1,188 $ 3,895
========= =========
Company's equity in net income (loss)
of joint ventures $ (1,353) $ 990
========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------
April 28, 1995 April 29, 1994
--------------------------- ------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 144,954 $ 140,083
Costs and expenses 131,214 129,465
Income tax provision 6,277 3,515
--------- ---------
Net income $ 7,463 $ 7,103
========= =========
Net income of Australian joint venture $ 8,739 $ 1,077 $ 6,699 $ 813
Net loss of Brazilian joint venture (b) (1,276) (982)
Net income of United States joint venture (c) 404 127
--------- --------- --------- ---------
$ 7,463 $ 7,103
========= =========
Company's equity in net income of
joint ventures $ 95 $ 940
========= =========
</TABLE>
(b) The Company's portion of the net loss of the Brazilian joint venture
included losses on foreign currency of $394,000 and $409,000 for the six and
three months ended April 28, 1995, respectively.
(c) Effective February 28, 1994, the Company sold its 50% interest in the United
States joint venture.
-12-
<PAGE> 13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note G--Per Share Data
Per share data are computed on the basis of the weighted average number of
shares of common stock outstanding and, if applicable, the assumed exercise of
dilutive outstanding stock options based on the treasury stock method.
Note H--Income Taxes
Significant components of the income tax provision attributable to operations
are as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------- ------------------
April 28, April 29, April 28, April 29,
1995 1994 1995 1994
--------- --------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Current:
Federal $ (763) $ 1,985 $(2,421) $ 2,946
Foreign 519 232 307 178
State and local 225 542 (372) 581
------- ------- ------- -------
(19) 2,759 (2,486) 3,705
------- ------- ------- -------
Deferred:
Federal 1,658 (38) 2,560 16
Foreign 20 20
State and local 396 (2) 612
------- ------- ------- -------
2,074 (40) 3,192 16
------- ------- ------- -------
$ 2,055 $ 2,719 $ 706 $ 3,721
======= ======= ======= =======
</TABLE>
-13-
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SIX MONTHS AND THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO
THE SIX MONTHS AND THREE MONTHS ENDED APRIL 29, 1994
The information which appears below relates to the current and prior periods,
the results of operations for which periods are not necessarily indicative of
the results which may be expected for any subsequent periods.
The following summarizes the results of operations by segment:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE THREE
MONTHS ENDED MONTHS ENDED
------------ ------------
April 28, April 29, April 28, April 29,
1995 1994 1995 1994
--------- --------- --------- ---------
(Dollars in thousands)
Revenues:
<S> <C> <C> <C> <C>
Technical Services and Temporary Personnel $ 253,952 $ 205,692 $ 135,034 $ 109,520
Electronic Publication and Typesetting Systems 32,703 28,561 16,703 16,068
Telephone Directory 26,656 29,673 13,994 17,785
Engineering and Construction 29,137 25,429 14,534 11,282
Computer Systems 33,542 17,049 11,291 8,236
Equity in net income (loss) of joint ventures (1,353) 990 95 940
Gain on sale of joint venture 9,770 9,770
Interest and other income - net 711 333 499 87
Elimination of intersegment revenues (2,098) (2,165) (960) (1,206)
--------- --------- --------- ---------
$ 373,250 $ 315,332 $ 191,190 $ 172,482
========= ========= ========= =========
Income Before Income Tax Provision
and Extraordinary Item:
Operating Profit (Loss):
Technical Services and Temporary Personnel $ 11,891 $ 6,063 $ 6,944 $ 4,044
Electronic Publication and Typesetting Systems 387 364 107 316
Telephone Directory (1,451) 361 (419) 719
Engineering and Construction 1,176 (221) 832 (569)
Computer Systems 2,256 (2,281) (1,838) (1,333)
Eliminations (31) 13 (9) (10)
--------- --------- --------- ---------
Total Operating Profit 14,228 4,299 5,617 3,167
Equity in net income (loss) of joint ventures (1,353) 990 95 940
Gain on sale of joint venture 9,770 9,770
Interest and other income - net 711 333 499 87
General corporate expenses (4,666) (4,676) (2,290) (2,454)
Interest expense (3,422) (4,038) (1,736) (1,963)
Foreign exchange gain (loss) - net 10 (121) (49) (25)
--------- --------- --------- ---------
Income Before Income Tax Provision
and Extraordinary Item $ 5,508 $ 6,557 $ 2,136 $ 9,522
========= ========= ========= =========
</TABLE>
-14-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED APRIL 28, 1995 COMPARED TO
THE SIX MONTHS ENDED APRIL 29, 1994--Continued
Results of Operations - Summary
In the six month period of 1995, revenues increased by $57,918,000, or 18%, from
fiscal 1994 as sales increased by $69,653,000, or 23%. The increase in sales
resulted primarily from a $48,260,000 increase in the sales of the Technical
Services and Temporary Personnel segment and a $16,493,000 increase in the sales
of the Computer Systems segment.
The Company had pretax income of $5,508,000 in 1995, compared to $6,557,000 in
1994. The 1994 income included a $9,770,000 pretax gain on the sale of a joint
venture. The operating profit of the Company's segments increased by $9,929,000
to $14,228,000 in 1995. The principal increases in the segments' operating
income were from the Technical Services and Temporary Personnel segment, with an
increase of $5,828,000 to $11,891,000, and the Computer Systems segment, where
the $2,256,000 profit represented a $4,537,000 favorable change from 1994.
The extraordinary item in fiscal 1994 was a charge, net of taxes, of $189,000,
due to the early redemption at par of $20,000,000 face value of the Company's
12-3/8% Subordinated Debentures.
Net income in 1995 was $3,453,000, compared to a net income of $3,649,000 in
1994.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$48,260,000, or 23%, in 1995 to $253,952,000 and operating profit increased by
$5,828,000, or 96%, to $11,891,000. Approximately $32,000,000 of the segment's
sales increase in 1995 was the result of business with new customers. One new
customer accounted for approximately $16,000,000 of the increase in sales.
Although it is anticipated that services to that customer will continue to be
rendered over the near-term, the level of services now being performed may be
reduced. The increase in operating profit was due to the increased sales volume
and an increase in gross margin of 1.7 percentage points due to lower payroll
taxes and workers' compensation insurance.
-15-
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED APRIL 28, 1995 COMPARED TO
THE SIX MONTHS ENDED APRIL 29, 1994--Continued
The Electronic Publication and Typesetting Systems segment's sales increased by
$4,142,000, or 15%, to $32,703,000 in 1995, while operating profit increased by
$23,000, or 6%. The sales increase was primarily due to increased equipment
sales in the U.S. and Pacific markets. The increase in operating profit was due
to the increased sales volume and a 1.4 percentage point decrease in overhead
expended per sales dollar, offset to a significant extent by a reduction in the
gross margin of 1.6 percentage points. The decrease in the gross margin
percentage resulted from a change in the product mix (a decrease in sales of
some high margin products and an increase in sales of some low margin items
which are in direct competition with other manufacturers' products). The markets
in which the segment competes are marked by rapidly changing technology, with
sales in fiscal year 1995 of equipment introduced within the last three years
comprising approximately 93% of equipment sales.
The Telephone Directory segment's sales decreased by $3,017,000, or 10%, to
$26,656,000 in fiscal 1995, while the segment incurred an operating loss of
$1,451,000, as compared to a profit of $361,000 in 1994. The sales decline is
due to lower telephone directory production volume, primarily related to the
expiration of a contract in early 1995. The operating loss was due to the lower
telephone directory production sales volume, an increase in costs to develop new
directory management systems and start-up losses incurred in the automated
production of newspaper display advertisements. This segment's services are
rendered under various short and long-term contracts. Certain contracts expire
in fiscal 1995 through 1997, and there can be no assurance that they will be
renewed on similar terms or replaced.
The Engineering and Construction segment's sales increased by $3,708,000, or
15%, to $29,137,000 in fiscal 1995 and operating profit was $1,176,000, compared
to a loss of $221,000 in 1994. The sales increase was due to a 25% increase in
the business systems division and a 17% increase in the construction division.
Operating results improved due to the increased sales volume and a 7.6
percentage point decrease in overhead expended per sales dollar, partially
offset by a reduction in the gross margin of 2.7 percentage points.
The Computer Systems segment's sales increased by $16,493,000, or 97%, to
$33,542,000 in 1995 and the operating profit was $2,256,000, as compared to a
loss of $2,281,000 in 1994. The increase in sales and operating profit was
primarily due to customer acceptance of two Delta Operating Service Systems
(DOSS) in the first quarter of 1995 which did not require customization. Under
the completed contract method of accounting used by this segment, revenues
together with related costs are recognized in income upon acceptance by the
customer. Deliveries and installations under other contracts, which require
significant customization, continue and customer acceptances are anticipated
later in 1995 and in 1996. Profitability rates on such contracts are not
anticipated to be at the same levels as those earned on the DOSS contracts
accepted in the first half of fiscal 1995. This segment's results on a
quarter-to-quarter basis are highly dependent on the acceptance by customers
under contract for the segment's directory assistance systems, which occurs
periodically rather than evenly.
-16-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED APRIL 28, 1995 COMPARED TO
THE SIX MONTHS ENDED APRIL 29, 1994--Continued
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting results of operations
for the six month periods were:
Interest income increased by $411,000, or 76%, in 1995. The increase was
primarily due to higher prevailing interest rates and funds available for
investment in interest-bearing securities.
The Company's equity in the net loss of its joint ventures was $1,353,000 in
1995, as compared to a net income of $990,000 in 1994. The loss was due to the
start-up and foreign currency related losses incurred by the Brazilian joint
venture which began operations in July 1994 and the absence of profits from the
U.S. joint venture sold in February 1994. The Company's share of the income of
its Australian joint venture, which produces a major portion of its revenues and
significantly all of its profit in the Company's second and third fiscal
quarters, increased by $119,000, due to increased revenue.
Selling and administrative expenses increased by $477,000, or 2%, to $20,134,000
in 1995 to support the increase in sales. However, these expenses expressed as a
percentage of sales were 5% in 1995 and 6% in 1994.
Research, development and engineering expenditures increased by $299,000, or 8%,
to $3,876,000 in 1995. The increase was due to additional product development by
the Telephone Directory and Electronic Publication and Typesetting Systems
segments.
Depreciation and amortization increased by $461,000, or 9%, to $5,765,000 in
1995. The increase is due to increased fixed asset expenditures in 1993, 1994
and the first half of 1995.
Interest expense decreased by $616,000, or 15%, to $3,422,000 in 1995. The
decrease was due to the redemption, in May 1994, of $10,000,000 of the
Company's 12-3/8% Subordinated Debentures.
The Company's effective tax rate was reduced to 37% in 1995, compared to 41% in
1994. The 1995 tax provision reflects the use of domestic net operating loss and
foreign tax carryforwards which were not previously recognized due to tax code
limitations.
-17-
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO
THE THREE MONTHS ENDED APRIL 29, 1994--Continued
Results of Operations - Summary
In the three month period of 1995, revenues increased by $18,708,000, or 11%,
from fiscal 1994 as sales increased by $28,911,000, or 18%. The increase in
sales resulted primarily from a $25,514,000 increase in the sales of the
Technical Services and Temporary Personnel segment.
The Company had pretax income of $2,136,000, compared to $9,522,000 in 1994. The
1994 income included a $9,770,000 pretax gain on the sale of a joint venture.
Operating profit increased by $2,450,000, or 77%, to $5,617,000. The principal
increases were an increase in operating profit of $2,900,000 by the Technical
Services and Temporary Personnel segment, and Engineering and Construction, with
an increase of $1,401,000, partially offset by decreases of $1,138,000 in the
Telephone Directory segment, $505,000 in Computer Systems and $209,000 in
Electronic Publication and Typesetting Systems.
Net income in fiscal 1995 was $1,430,000, compared to a net income of $5,801,000
in 1994.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$25,514,000, or 23%, in 1995 to $135,034,000 and operating profit increased by
$2,900,000, or 72%, to $6,944,000. Approximately $19,000,000 of the segment's
sales increase in 1995 was the result of business with new customers. The
operating profit increase in 1995 was due to the increased sales volume and an
increased gross margin of 1.6 percentage points.
The Electronic Publication and Typesetting Systems segment's sales increased by
$635,000, or 4%, to $16,703,000 in 1995, while operating profit decreased by
$209,000 to $107,000. The sales increase was primarily due to increased
equipment sales in the Pacific market, partially offset by decreases in the U.S
and European markets. The decrease in operating profit was primarily due to a
reduction in the gross margin of 1.9 percentage points, partially offset by the
increase in sales and a .6 percentage point decrease in overhead expended per
sales dollar. The decrease in the gross margin percentage resulted from a change
in the product mix (a decrease in sales of some high margin products and an
increase in sales of some low margin items which are in direct competition with
other manufacturers' products).
The Telephone Directory segment's sales decreased by $3,791,000, or 21%, to
$13,994,000 in fiscal 1995 while the segment incurred an operating loss of
$419,000, as compared to a profit of $719,000 in 1994. The sales decline was due
to lower telephone directory production volume, primarily related to the
termination of a contract in early 1995 and a 25% decrease in publication sales
of independent directories. The reduction in the publication sales of
independent directories primarily relates to two directories published in the
second quarter of fiscal 1994, which will be published in the third quarter of
fiscal 1995. The operating loss was due to the lower telephone directory
production and
-18-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO
THE THREE MONTHS ENDED APRIL 29, 1994--Continued
independent directory publication sales volumes, an increase in costs to develop
new directory management systems and start-up losses incurred in the automated
production of newspaper display advertisements.
The Engineering and Construction segment's sales increased by $3,252,000, or
29%, to $14,534,000 in fiscal 1995, with an operating profit of $832,000,
compared to a loss of $569,000 in 1994. The sales increase was due to a 39%
increase in the construction division and a 19% increase in the business systems
division. Operating results improved due to the increased sales volume and a
10.3 percentage point decrease in overhead expended per sales dollar.
The Computer Systems segment's sales increased by $3,055,000, or 37%, to
$11,291,000 in 1995, while the operating loss increased by $505,000, or 38%, to
$1,838,000. The sales increase was attributable to greater DOSS maintenance
revenue and an increase in sales of conservation services to utilities. The
operating loss increased due to additional expenditures on new business
development and high start-up costs incurred under maintenance contracts. This
segment's results on a quarter-to-quarter basis are highly dependent on the
acceptance by customers under contract for the segment's directory assistance
systems, which occurs periodically rather than evenly.
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting results of operations
for the three month periods were:
Interest income increased by $161,000, or 52%, in 1995. The increase was
primarily due to higher prevailing interest rates and funds available for
investment in interest-bearing securities.
In the three month period of 1995, the Company's equity in the net income of its
joint ventures decreased by $845,000, or 90%, to $95,000. The decrease was due
to the start-up and foreign currency related losses incurred by the Brazilian
joint venture which began operations in July 1994. The Company's share of the
income of its Australian joint venture increased by $264,000 due to increased
revenue.
Selling and administrative expenses decreased by $409,000, or 4%, to $10,383,000
in 1995, due principally to the expenses incurred in 1994 in relocating the
corporate offices. These expenses expressed as a percentage of sales were 5% in
1995 and 7% in 1994.
-19-
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO
THE THREE MONTHS ENDED APRIL 29, 1994--Continued
Depreciation and amortization increased by $309,000, or 12%, to $2,969,000 in
1995. The increase is due to increased fixed asset expenditures in 1993, 1994
and the first half of 1995.
Interest expense decreased by $227,000, or 12%, to $1,736,000 in 1995. The
decrease was due to the redemption, in May 1994, of $10,000,000 of the
Company's 12-3/8% Subordinated Debentures.
The Company's effective tax rate was reduced to 33% in 1995 compared to 39% in
1994. The 1995 tax provision reflects the use of domestic net operating loss and
foreign tax carryforwards which were not previously recognized due to tax code
limitations.
-20-
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Capital Resources
Cash and cash equivalents decreased by $3,543,000 in 1995 to $13,506,000 and
working capital decreased by $12,269,000 to $49,570,000. The decrease in working
capital was primarily due to the inclusion in current liabilities of $10,000,000
of debentures called by the Company in April 1995 for redemption on May 8, 1995.
Cash flows provided by operating activities for the six months ended April 28,
1995 were $5,858,000 compared with $13,144,000 in the six months ended April 29,
1994. The decrease primarily relates to an increase in the level of accounts
receivable, due in part to a $15,000,000 reduction in interests in accounts
receivable sold at April 28, 1995 compared with October 28, 1994.
The Company believes that its current financial position, working capital and
future cash flows will be sufficient to fund its presently contemplated
operations and satisfy its debt obligations. The Company has no material capital
commitments. The Company may determine, from time-to-time in the future, to buy
additional shares of its common stock and/or debentures in the market or in
privately negotiated transactions.
In addition to its cash and cash equivalents, at April 28, 1995, the Company's
investment portfolio, primarily U.S. Treasury Notes and certificates of deposit,
had a carrying value of $5,922,000. The Company also has a $10,000,000 credit
line with a domestic bank under a revolving credit agreement which expires in
February 1996, unless renewed. The Company had outstanding bank borrowings under
that line of $4,910,000 at April 28, 1995. In addition, at April 28, 1995, the
Company had the right to sell up to $35,000,000 of additional interests in
receivables under its existing sales program. In May 1995, an additional
$10,000,000 of the interests was sold to finance the redemption of the
debentures.
-21-
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
15.01 Acknowledgment letter from Ernst & Young LLP
15.02 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
(b) Reports on Form 8-K:
The only report on Form 8-K filed during the quarter ended April 28, 1995
was a report dated March 31, 1995 (date of earliest event reported),
reporting under Item 5. Other Events.
-22-
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
(Registrant)
BY: s/ JACK EGAN
------------
Date: June 9, 1995 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
-23-
<PAGE> 24
EXHIBIT INDEX
15.01 Acknowledgment letter from Ernst & Young LLP
15.02 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 15.01
June 12, 1995
Securities and Exchange Commission
Washington, DC 20549
We are aware of the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988,
Post-Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8
dated April 8, 1983, Registration Statement No. 2-88018 on Form S-3 dated
December 1, 1983 and Registration Statement No. 33-18565 on Form S-8 dated
December 14, 1987 of Volt Information Sciences, Inc., of our report dated May
31, 1995 relating to the unaudited condensed consolidated interim financial
statements of Volt Information Sciences, Inc. which are included in its Form
10-Q for the quarter ended April 28, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
New York, New York
<PAGE> 1
EXHIBIT 15.02
ERNST & YOUNG LLP 787 Seventh Avenue Phone # 212-773-3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
TO THE STOCKHOLDERS
VOLT INFORMATION SCIENCES, INC.
We have reviewed the accompanying unaudited condensed consolidated balance sheet
of Volt Information Sciences, Inc. and subsidiaries as of April 28, 1995, and
the related condensed consolidated statements of operations for the six and
three month periods ended April 28, 1995 and April 29, 1994, and the related
condensed consolidated statements of cash flows for the six month periods ended
April 28, 1995 and April 29, 1994. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, which will be performed for the full
year with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Volt Information Sciences, Inc. as
of October 28, 1994, and the related consolidated statements of operations and
cash flows for the year then ended, not presented herein; and in our report
dated December 19, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of October 28, 1994, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Ernst & Young LLP
May 31, 1995
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